Denver Commercial Property Market Slows

In a few weeks, Kennedy Associates will finish construction of a new 400,000-square-feet office building with no tenants, so far. This is typical for the Denver real estate market. Owners are complaining that businesses that are slashing their work force and scaling down operations are leaving them desperate to retain tenants and fill newly empty spots.

“'For office demand to really pickup you have to have job growth and we don't see job growth happening until we’re into 2010,” projects Bob Ratliffe, executive vice president of portfolio management for Kennedy Associates, based in Seattle, Wash. Of the 18-story building in Denver he says, “We're hopefully delivering an office building that will be attractive to tenants as the market comes back.'”

Denver’s commercial property market began to slow a year ago. Since then, vacancies have surged and are projected to outpace the national rates for office, retail, and apartment properties this year, according to Marcus & Millichap Real Estate Investment Services. The worst hit property segment in Denver is the office sector, where vacancies hit 16 percent last year and are projected to climb to nearly 20 percent by the end of this year. The U.S. rate, by contrast, is anticipated to be about 18 percent.

But Denver has a few things going for it that should help it bounce back. The city is a hub for alternative energy research, for example, which has made it attractive for government and the private sector. The suburb of Golden is home to the National Renewable Energy Laboratory, the U.S. government's key renewable energy and energy efficiency research center.